SEC, Finra Warn Against Buying Old GM Stock
July 14 2009 - 7:08PM
Dow Jones News
Securities regulators on Tuesday issued a joint alert warning
investors against buying or retaining over-the-counter shares of
the now-bankrupt General Motors Corp.
The alert, sent out by the Securities and Exchange Commission
and the Financial Industry Regulatory Authority, said there is
"widespread misunderstanding by investors" that the stock in the
bankrupt GM company is related to the "new" General Motors Co. that
emerged from bankruptcy last week as a new entity that will belong
in part to the U.S. and Canadian governments.
"Motors Liquidation Company and the 'new' GM are separate and
distinct," the alert said. "The new GM currently has no publicly
traded securities, and none of Motors Liquidation Company's
publicly owned stocks or bonds are or will become securities of the
new GM."
The alert added that "Motors Liquidation Company is currently
winding its way through bankruptcy court - and there is a real
possibility that stock holders will receive nothing from these
proceedings."
Finra, the self-regulatory group for the brokerage industry,
halted over-the-counter trading in old GM stock under the GMGMQ
ticker symbol last Friday. A new ticker symbol - MTLQQ - will be
issued for the old stock to avoid having it confused with the new
GM, which does not have any publicly traded securities.
Over-the-counter trading using that new ticker symbol is slated to
resume Wednesday.
The SEC and Finra both said that bankrupt companies like GM have
often been the subject of rumors about stock tips.
"Unfortunately, investors may have received confusing,
potentially misleading, information about the old GM," the alert
said. "As recently as last Friday, newsletters and other promoters
have touted the purchase of the stock."
The alert added that investors are often confused by the fact
that a company's securities may continue to trade after bankruptcy
even though the common stock of that company is likely to be
cancelled.
"When a company files for reorganization under the federal
bankruptcy laws, investors are often tempted to buy or hold the
company's common stock," the alert said. "The reality is, however,
that when companies emerge from bankruptcy, the common stock of the
'old' company is usually worthless."
-By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634;
sarah.lynch@dowjones.com